methods of segmentation.

distribution. A convenient way to manage such operations is to organize the management of the firm around each geographic segment as a quasi-autonomous entity. 2.

Product Line. Companies that produce highly diversified products often organize around product lines, creating separate divisions for each. Product segmentation allows

the organization to devote specialized management, labor, and resources to segments separately, almost as if they were separate firms. 3. Business Function. Functional

segmentation divides the organization into areas of specialized responsibility based on tasks. The functional areas are determined according to the flow of primary

resources through the firm. Examples of business function segments are marketing, production, finance, and accounting. Some firms use more than one method of

segmentation. For instance, an international conglomerate may segment its operations first geographically, then by product within each geographic region, and then

functionally within each product segment.

Functional Segmentation
Segmentation by business function is the most common method of organizing. To illustrate it, we will assume a manufacturing firm that uses these resources: materials,

labor, financial capital, and information. Table 1-2 shows the relationship between functional segments and these resources. The titles of functions and even the

functions themselves will vary greatly among organizations, depending on their size and line of business. A public utility may have little in the way of a marketing

function compared to an automobile manufacturer. A service organization may have no formal production function and little in the way of inventory to manage. One firm

may call its labor resource personnel, whereas another uses the term human resources. Keeping in mind these variations, we will briefly discuss the functional areas of

the hypothetical firm shown in Figure 1-8. Because of their special importance to the study of information systems, the accounting and information technology (IT)

functions are given separate and more detailed treatment.

TABLE 1-2

Functions from Resources Resource
Materials

Business Function
Inventory Management Production Marketing Distribution

Labor Financial Capital Information

Personnel Finance Accounting Information Technology

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